Consumer inflation in the United States eased slightly in April, providing a welcome surprise for markets rattled by President Donald Trump’s aggressive tariff policy.
According to data released Tuesday by the Labor Department, the Consumer Price Index (CPI) rose 2.3% year-on-year, down from 2.4% in March, marking the smallest annual increase since February 2021. The figure also came in just below economists’ expectations compiled by Dow Jones Newswires and The Wall Street Journal.
The data reflects a period during which the Trump administration imposed sweeping new tariffs on imports including steep duties targeting Chinese goods sparking fears of accelerated inflation and economic slowdown. While financial markets initially reacted with concern, Trump has since rolled back some tariffs and paused others, which has helped calm investors.
“And just like that, the markets’ twin fears a tariff-induced recession and sticky inflation have been greatly assuaged,” said Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management.
“Markets dipped at the start of April over growth concerns and recession risks tied to the tariffs, but the recent pause, signs of progress with China, and this softer inflation print have all helped sentiment recover.”
Shelter, Energy, and Imports in Focus
On a monthly basis, inflation increased 0.2%, driven largely by a 0.3% rise in shelter costs, which accounted for more than half of the overall gain.
Core inflation which excludes the more volatile food and energy components also rose 0.2% for the month and 2.8% over the past year, aligning with market forecasts.
Signs of tariff impact were faint but present. The household furnishings and operations index, an import-sensitive category, jumped 1.0% in April after remaining flat in March. This uptick could reflect early signs of cost pass-throughs related to trade duties.
Still, economists noted it may be premature to attribute any broad inflationary movement to tariffs just yet.
In a recent note, Deutsche Bank analysts pointed to household goods as a likely early indicator of tariff effects, but added that it’s “too early for tariffs to be evident in the aggregate numbers.”
Energy Prices Begin to Rebound
Energy prices, which saw a sharp decline in March, rebounded modestly in April. The energy index rose 0.7%, largely driven by higher natural gas and electricity costs. However, gasoline prices slipped by 0.1% on a seasonally adjusted basis and were down 11.8% year-on-year.
Despite these fluctuations, the overall inflation picture remains relatively stable, suggesting that for now fears of runaway prices sparked by the trade war may be overstated.
